Everything you need to know about property tax after the Autumn Budget

Following their return to power in July's general election, Chancellor Rachel Reeves has presented Labour’s first Budget since 2010. But what how will the budget impact the Scottish property? Let's find out...

What has happened in England and Northern Ireland?

The most significant changes in the budget in relation to housing is an update to the threshold at which house buyers in England and Northern Ireland start paying stamp duty on a main home. Reversing a previous tax cut, the threshold will drop from £250,000 to £125,000 in April.

Another notable update is the threshold at which first-time buyers pay the tax, which will also drop back, from £425,000 to £300,000.

The budget also noted that a Stamp Duty surcharge, paid on second home purchases in England and Northern Ireland, will increase from 3% to 5%.

How will the Autumn Budget impact the Scottish housing market?

Land and Buildings Transaction Tax (LBTT) is money that must be paid when buying a property above a certain value in Scotland. Since LBTT is set by the Scottish Parliament, the changes in England and Northern Ireland don’t affect Scotland.

The changes in the surcharge paid on second home purchases in England and Northern Ireland does not apply in Scotland, but is controlled by a charge known as Additional Dwelling Supplement.

The updates to the budget continue to show great disparity between property tax in Scotland and elsewhere in the UK. First-time buyers in Scotland have to pay LBTT on properties over £175,000 while in England and NI, the threshold sits at £300,000, meaning a difference of £125,000.

What is LBTT?

Land and Buildings Transaction Tax (LBTT) is Scotland’s version of stamp duty. This property tax is applied to residential and commercial property purchases in Scotland.

How much is LBTT in Scotland?

 The amount of LBTT paid on a residential property transaction depends on the property purchase price. There are various LBTT bands, with a different percentage of tax applied to each band.

 The current rates and bands are set out in the table below.

Purchase price	LBTT rate
Up to £145,000	0%
£145,001 to £250,000	2%
£250,001 to £325,000	5%
£325,001 to £750,000	10%
Over £750,000	12%

First-time buyers pay a little less LBTT

A relief for first-time buyers is available, which means that those buying their first home have a zero-tax threshold of £175,000 instead of £145,000.  The relief means a reduction in tax payable of up to £600 for qualifying first-time buyers.

Calculating your potential LBTT payment

 Use our ESPC LBTT Calculator to work out how much tax you could be paying.

What about the Additional Dwelling Supplement?

The Additional Dwelling Supplement (ADS) is an additional 6% surcharge which applies to most second home purchases in addition to the LBTT payment.

This means if you are buying a residential property and you already own a home, you will need to pay the 6% ADS charge.

If you are planning to sell your original property, you can claim the ADS amount back provided you sell within 18 months.

Use of ADS calculator to find out how much tax you would pay on the purchase of a second property.

What will happen to LBTT in the Scottish Budget?

We wait to see if there will be changes announced to LBTT as part of the Scottish Budget in December.